2000 (10) TMI 184 - AT - Income Tax

Summary

Issues:
1. Disallowance under section 40A(3) of the Income Tax Act
2. Disallowance of car expenses and depreciation on cars

Analysis:

Issue 1: Disallowance under section 40A(3) of the Income Tax Act
The appeal was filed by the assessee against the order of the CIT(A) for the assessment year 1988-89. The main contention of the assessee was regarding the disallowance of Rs. 25,000 made on account of payment to its sister concern, M/s Vineet Trading Corporation, under section 40A(3) of the Income Tax Act. The assessee argued that the identity of the payee had been established, and the genuineness of the payment was proven. It was highlighted that the payment was not for purchases made during the year, and therefore, the proviso to section 40A(3) was not applicable. The assessee relied on various judgments and circulars to support its case. The Departmental Representative, on the other hand, contended that the assessee failed to demonstrate exceptional circumstances as required by the rules. The Tribunal examined the facts and found that the payment of Rs. 25,000 was not for the purchase of goods or any expenditure attracting the provisions of section 40A(3). Consequently, the Tribunal directed the Assessing Officer to delete the addition of Rs. 25,000, thereby partly allowing the appeal of the assessee.

Issue 2: Disallowance of car expenses and depreciation on cars
Another issue raised in the appeal was the disallowance of 1/4th of car expenses and depreciation on cars. The Tribunal noted that a similar issue had been considered in a previous appeal of the assessee. The Tribunal directed the Assessing Officer to decide on this issue in accordance with the order given in the previous appeal. However, the Tribunal did not find any reason to interfere with the application of depreciation. Consequently, the appeal of the assessee was partly allowed in this regard as well.

In conclusion, the Appellate Tribunal ITAT Jaipur, comprising of Members Dinesh K. Agarwal and B. R. Jain, partly allowed the appeal of the assessee concerning the disallowance under section 40A(3) of the Income Tax Act and the disallowance of car expenses and depreciation on cars. The Tribunal provided detailed reasoning for its decision on each issue, considering the arguments presented by the assessee and the Departmental Representative, along with relevant legal precedents and provisions of the Income Tax Act.